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Rating Action:

Moody's downgrades five Chilean banks and one branch, outlook changes to stable; affirms Itaú CorpBanca

27 Jul 2018

New York, July 27, 2018 -- Moody's Investors Service ("Moody's") has today downgraded the senior unsecured debt and deposit ratings of four Chilean banks - Banco de Chile, Banco del Estado de Chile (Banco Estado), Banco Santander-Chile (Santander), and Banco de Crédito e Inversiones (Bci) - and changed their outlooks to stable from negative.

Moody's also downgraded the long-term deposit rating of Banco Estado, New York Branch, as well as its long-term counterparty risk ratings and assessments.

The short-term deposit and counterparty risk ratings and assessments of the five banks and their two branches were affirmed, where applicable.

At the same time, Moody's affirmed Itaú CorpBanca's deposit and counterparty risk ratings and assessment.

The banks' other ratings and assessments were unaffected by this action.

The following ratings and assessments were downgraded:

Issuer: Banco de Chile

.Long-term local and foreign currency senior unsecured deposit ratings to A1 from Aa3, outlook changed to stable, from negative

.Long-term foreign currency senior unsecured debt rating to A1 from Aa3, outlook changed to stable, from negative

.Long-term local and foreign currency senior unsecured MTN program ratings to (P)A1 from (P)Aa3

.Long-term local and foreign currency counterparty risk ratings to A1 from Aa3

.Long-term counterparty risk assessment to A1(cr) from Aa3(cr)

Issuer: Banco de Crédito e Inversiones

.Long-term local and foreign currency senior unsecured deposit ratings to A2 from A1, outlook changed to stable, from negative

.Long-term foreign currency senior unsecured debt rating to A2 from A1, outlook changed to stable, from negative

Issuer: Banco del Estado de Chile

.Long-term local and foreign currency senior unsecured deposit ratings to A1 from Aa3, outlook changed to stable, from negative

.Long-term foreign currency senior unsecured debt rating to A1 from Aa3, outlook changed to stable, from negative

.Long-term foreign currency senior unsecured MTN program rating to (P)A1 from (P)Aa3

.Long-term local and foreign currency counterparty risk ratings to A1 from Aa3

.Long-term counterparty risk assessment to A1(cr) from Aa3(cr)

Issuer: Banco Estado, New York Branch

.Long-term foreign currency senior unsecured deposit rating to A1 from Aa3, outlook changed to stable, from negative

.Long-term local currency senior unsecured MTN program rating to (P)A1 from (P)Aa3

.Long-term local and foreign currency counterparty risk ratings to A1 from Aa3

.Long-term counterparty risk assessment to A1(cr) from Aa3(cr)

Issuer: Banco Santander-Chile

.Long-term local and foreign currency senior unsecured deposit ratings to A1 from Aa3, outlook changed to stable, from negative

.Long-term local and foreign currency senior unsecured debt ratings to A1 from Aa3, outlook changed to stable, from negative

.Long-term foreign currency senior unsecured MTN program rating to (P)A1 from (P)Aa3

.Long-term local and foreign currency counterparty risk ratings to A1 from Aa3

.Long-term counterparty risk assessment to A1(cr) from Aa3(cr)

Issuer: BBVA (Chile)

.Long-term local and foreign currency counterparty risk ratings to A3 from A2

.Long-term counterparty risk assessment to A3(cr) from A2(cr)

The following ratings and assessments were affirmed:

Issuer: Banco de Chile

.Short-term local and foreign currency deposit ratings at P-1

.Short-term local and foreign currency counterparty risk ratings at P-1

.Short-term counterparty risk assessment at P-1(cr)

.Subordinate Medium-Term Note Program at (P)Baa1

.Commercial Paper at P-1

Issuer: Banco de Crédito e Inversiones

.Short-term local and foreign currency deposit ratings at P-1

.Short-term local and foreign currency counterparty risk ratings at P-1

.Long-term local and foreign currency counterparty risk ratings at A1

.Short-term counterparty risk assessment at P-1(cr)

.Long-term counterparty risk assessment at A1(cr)

Issuer: Banco de Crédito e Inversiones (Miami Branch)

.Short-term counterparty risk assessment at P-1(cr)

.Long-term counterparty risk assessment at A1(cr)

.Long-term local and foreign currency counterparty risk ratings at A1

.Short-term local and foreign currency counterparty risk ratings at P-1

.Commercial Paper at P-1

Issuer: Banco del Estado de Chile

.Short-term local and foreign currency deposit ratings at P-1

.Short-term local and foreign currency counterparty risk ratings at P-1

.Short-term counterparty risk assessment at P-1(cr)

Issuer: Banco Estado, New York Branch

.Short-term foreign currency deposit ratings at P-1

.Short-term local and foreign currency counterparty risk ratings at P-1

.Short-term counterparty risk assessment at P-1(cr)

.Commercial Paper at P-1

Issuer: Banco Santander-Chile

.Short-term local and foreign currency deposit ratings at P-1

.Short-term local and foreign currency counterparty risk ratings at P-1

.Short-term counterparty risk assessment at P-1(cr)

Issuer: BBVA (Chile)

.Long-term local and foreign currency senior unsecured deposit ratings at A3, outlook stable

.Short-term local and foreign currency deposit ratings at P-2

.Short-term local and foreign currency counterparty risk ratings at P-2

.Short-term counterparty risk assessment at P-2(cr)

Issuer: Itaú CorpBanca

.Long-term local and foreign currency senior unsecured deposit ratings at A3, outlook stable

.Short-term local and foreign currency deposit ratings at P-2

.Long-term foreign currency senior unsecured debt rating at A3, outlook stable

.Long-term local and foreign currency counterparty risk ratings at A2

.Short-term local and foreign currency counterparty risk ratings at P-1

.Long-term counterparty risk assessment at A2(cr)

.Short-term counterparty risk assessment at P-1(cr)

Outlook Actions:

Issuer: Banco de Chile

.Outlook, Changed To Stable From Negative

Issuer: Banco de Crédito e Inversiones

.Outlook, Changed To Stable From Negative

.Issuer: Banco del Estado de Chile

.Outlook, Changed To Stable From Negative

Issuer: Banco Santander-Chile

.Outlook, Changed To Stable From Negative

Issuer: Banco Estado, New York Branch

.Outlook, Changed To Stable From Negative

Issuer: BBVA (Chile)

.Outlook, Remains Stable

Issuer: Itaú CorpBanca

.Outlook, Remains Stable

RATINGS RATIONALE

The rating actions were prompted by the downgrade of Chile's sovereign rating to A1 from Aa3, which reflected the government's lower capacity to provide financial support to the country's banks. As a result of the sovereign downgrade, several of the affected banks' ratings no longer benefit from as much uplift from government support as was previously the case. The remaining ratings were unaffected, however, because the larger differentials between the sovereign rating and their corresponding standalone ratings.

Although the government's capacity to provide support has decreased slightly, as reflected by the downgrade of its rating, it remains very strong. Moreover, the government's willingness to support the banks is largely unaffected. Consequently, all the affected banks' long-term ratings continue to benefit from two notches of uplift from their respective adjusted baseline credit assessments. Moody's assessment considers the Chilean authorities' track record of providing support to distressed financial institutions in the past; the very large deposit franchises of all of the affected banks, which are the country's largest with deposit market shares ranging from 6% to 20% as of March 2018; and the material systemic consequences of an unsupported failure of any of them.

The sovereign rating action was prompted by the deterioration of Chile's fiscal position in recent years and the country's lower medium-term growth prospects. The banks' standalone ratings were unaffected by the sovereign action because they are not directly influenced by the government's fiscal strength and they already incorporate the reduction in the country's growth prospects.

WHAT COULD CHANGE THE RATING DOWN OR UP

As the downgraded ratings all continue to benefit from uplift due to sovereign support, they will face downward/upward pressure if Chile's government bond rating is upgraded/downgraded.

Banco de Chile's deposit and senior debt ratings could face downward pressure if its asset quality deteriorates substantially, resulting in sustained challenges to its earnings generation and capitalization.

Although Santander's asset quality and profitability have improved in recent years, further increases in market funding and/or decreases in deposit funding could put downward pressure on its deposit and senior debt ratings. Downward pressure would also arise if Santander's nonperforming loan ratio rises above 3.5% or if its tangible common equity falls below 10% of adjusted risk-weighted assets.

Barring a sovereign upgrade, however, neither bank is likely to face upward deposit and senior debt ratings pressure even if their fundamentals improve, given that their ratings are already at the same level as the sovereign bond rating. The banks' counterparty risk ratings could nevertheless face upward pressure with an improvement in fundamentals.

Bci's deposit and senior debt ratings would face upward ratings pressure if loan growth were to slow to more sustainable levels, alleviating pressure on asset quality, and profitability stabilizes at levels recorded in the first quarter. The counterparty risk ratings of Bci could face downward pressure if the bank expands in Florida even more rapidly than currently anticipated, and/or if the quality of its Floridian portfolio begins to deteriorate.

Unless BBVA (Chile)'s financial fundamentals deteriorate significantly, the ratings will face limited downward pressure thanks to high support from both Bank of Nova Scotia and the government of Chile.

However, improvements to BBVA (Chile)'s capitalization and profitability would not affect the bank's deposit and debt ratings because the ratings would benefit from fewer notches of uplift, from government support.

Itaú CorpBanca's ratings could be upgraded if the bank's profitability and capitalization . Its ratings could be downgraded if the bank's profitability weakens further , if its asset quality deteriorates, and/or borrower concentrations increase.

Given that Banco Estado is backed by the government, the bank's ratings are not likely to be affected by any change in its intrinsic financial strength.

The principal methodology used in these ratings was Banks published in July 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Felipe Carvallo
VP-Sr Credit Officer
Financial Institutions Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653

M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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